At first glance, Shands Healthcare’s (“Shands”) agreement to pay $26 million to the federal government and the State of Florida appears to be like all the other recently reported health care fraud settlements of whistleblower complaints. Upon closer inspection however, one significant difference stands out: the relator who initially brought the case against Shands was a consultant hired by Shands to conduct the on-site payor review that revealed the alleged fraud.  This settlement proves the importance of anticipating potential whistleblowers because they can be anyone.

On Monday, August 19, 2013, the US Department of Justice (“DOJ”) announced the Shands settlement to resolve whistleblower allegations of false claims to Medicare, Medicaid and other federal health care programs.  The details of this case came to light after the complaint was unsealed on August 19. The relator in this case was Terry L. Myers, founder and President of YPRO Corporation (“YPRO”), a nationwide health care consulting firm.  According to the complaint, YPRO’s primary services include coding audits, medical necessity audits and clinical documentation improvement audits.  Shands operates a network of health care providers. Shands contracted with YPRO to perform on-site Medicare and Commercial payor review of observation services and one-day inpatient stays at six Shands hospitals in June, 2006.  Allegedly, the audits revealed systemic serious billing, coding and compliance issues occurring on a daily basis, which resulted in overbilling to and overpayment by Medicare, Medicaid, and other federal health care programs.

After completion of the audits and distribution of audit reports highlighting allegedly improper claims, YPRO offered quotes to Shands for future medical necessity training and other needed coding and compliance education that YPRO could provide.  Shands elected to perform their own corrective action plan internally.  The corrective action plan did address “adjustments” for the overpayment identified by the 2006 YPRO audit but YPRO never observed any action actually taken.  Relator allegedly discussed the need for self-disclosure of overpayments with Shands but never saw any evidence of self-disclosure.  Shands contracted with YPRO for an audit in 2007 to reassess the same issues.  YPRO alleged that the results of the 2007 audit were significantly worse than the 2006 audit and that overbilling and overpayments increased and under-billing decreased.  YPRO recommended continued monitoring and another audit which Shands declined.

Relator’s complaint alleged violations of the Federal False Claims Act, conspiracy to violate the False Claims Act, and violations of the Florida False Claims Act.  The DOJ reported that the settlement money will be distributed as follows: $25,170,400 to Medicare and other federal health care payors and $829,600 to the State of Florida, with Myers’ portion not yet determined.  These facts highlight the necessity for compliance programs designed to anticipate and recognize potential whistleblowers and respond appropriately.  The present reality is that vigilant compliance is crucial because whistleblowers can be anyone.